Intel reported disappointing financial results for the second quarter of 2024, prompting the tech giant to announce comprehensive job cuts and restructuring measures. The company revealed a 1% year-over-year decline in revenue to $12.8 billion, alongside a GAAP loss per share of $0.38. Non-GAAP earnings per share were reported at $0.02. The lackluster performance has led to a decision to implement a more than 15% reduction in headcount to resize and refocus the company.
Restructuring Efforts
Intel’s restructuring plan includes several key elements aimed at creating a sustainable financial engine that will support long-term growth and innovation. The company has outlined a structural and operating realignment across its divisions, targeting more than $10 billion in operating expense and capital expenditure reductions by 2025. Key priorities of the plan include:
- Reducing Operating Expenses: Streamlining operations with a significant cut in R&D and marketing, general and administrative expenses, aiming for $20 billion in 2024 and $17.5 billion in 2025.
- Reducing Capital Expenditures: Aligning capital investments with market requirements, projecting a 20% reduction in gross capital expenditures for 2024, targeting $25-$27 billion.
- Reducing Cost of Sales: Generating $1 billion in savings in non-variable cost of sales by 2025.
- Maintaining Core Investments: Continuing to invest in long-term innovation and technology leadership, with a focus on building a resilient semiconductor supply chain.
Additionally, Intel has decided to suspend its dividend starting in the fourth quarter of 2024 to prioritize liquidity and support strategic investments. Despite this, the company remains committed to reinstating a competitive dividend as cash flows improve.
Q2 2024 Financial Performance by Business Unit
- Client Computing Group (CCG): Revenue of $7.4 billion, up 9% year-over-year.
- Data Center and AI (DCAI): Revenue of $3.0 billion, down 3% year-over-year.
- Network and Edge (NEX): Revenue of $1.3 billion, down 1% year-over-year.
- Total Intel Products Revenue: $11.8 billion, up 4% year-over-year.
- Intel Foundry: Revenue of $4.3 billion, up 4% year-over-year.
- Altera: Revenue of $361 million, down 57% year-over-year.
- Mobileye: Revenue of $440 million, down 3% year-over-year.
Q2 2024 Financial Highlights
- Revenue: $12.8 billion, down 1% YoY.
- GAAP EPS: $(0.38); Non-GAAP EPS: $0.02.
- Forecast for Q3 2024: Revenue between $12.5 billion to $13.5 billion; GAAP EPS: $(0.24); Non-GAAP EPS: $(0.03).
Key Points:
- Second-quarter revenue of $12.8 billion, down 1% YoY.
- Second-quarter GAAP earnings (loss) per share (EPS) attributable to Intel was $(0.38); non-GAAP EPS attributable to Intel was $0.02.
- Forecasting third-quarter 2024 revenue of $12.5 billion to $13.5 billion; expecting third-quarter GAAP EPS attributable to Intel of $(0.24); non-GAAP EPS attributable to Intel of $(0.03).
- Implementing comprehensive reduction in spending, including a more than 15% headcount reduction, to resize and refocus.
- Suspending dividend starting in the fourth quarter of 2024. The company reiterates its long-term commitment to a competitive dividend as cash flows improve to sustainably higher levels.
- Achieved key milestones on Intel 18A with the 1.0 Process Design Kit (PDK) released and key power-on of first client and server products on Intel 18A, Panther Lake and Clearwater Forest.
Intel CEO Pat Gelsinger and CFO David Zinsner’s Statements
Intel CEO Pat Gelsinger emphasized the company’s commitment to improving operational efficiency and accelerating its IDM 2.0 transformation despite the disappointing Q2 results. CFO David Zinsner highlighted the steps being taken to strengthen Intel’s financial position through spending reductions and strategic investments.
“Our Q2 financial performance was disappointing, even as we hit key product and process technology milestones. Second-half trends are more challenging than we previously expected, and we are leveraging our new operating model to take decisive actions that will improve operating and capital efficiencies while accelerating our IDM 2.0 transformation,” said Pat Gelsinger, Intel CEO. “These actions, combined with the launch of Intel 18A next year to regain process technology leadership, will strengthen our position in the market, improve our profitability and create shareholder value.”
“Second-quarter results were impacted by gross margin headwinds from the accelerated ramp of our AI PC product, higher than typical charges related to non-core businesses and the impact from unused capacity,” said David Zinsner, Intel CFO. “By implementing our spending reductions, we are taking proactive steps to improve our profits and strengthen our balance sheet. We expect these actions to meaningfully improve liquidity and reduce our debt balance while enabling us to make the right investments to drive long-term value for shareholders.”
